August 15, 2016

Are you aware that you can get deduction for the savings bank interest earned. Section - 80TTA of Income-tax Act, 1961-2014 deal with Deduction in respect of interest on deposits in savings account. You need to include this in Schedule VI A under 80TTA. Currently savings bank interest till Rs 10000 is deducted from your earnings.

BTW you have to include entire savings bank interest earned during the year in Schedule OS as interest income.

Incorporated in
1989, Advanced Enzyme Technologies Ltd is an India based company engaged in
research, development, manufacturing and marketing of Healthcare, Nutrition
and Bio-Processing products. Information in this paragraph is copied from
chittorgarh.com.

Company produces
over 400 proprietary products developed from 60 enzymes. Advanced Enzyme
operate in two primary business verticals namely Healthcare & Nutrition
(human and animal) and Bio-Processing (food and non-food).

Company has 13
patents registered in its name and applications for registration of 4 patents
are pending.

Advanced Enzyme is
among top 15 companies in enzyme sales in the world and 2nd largest in India.
Company has over 20 years of fermentation experience in the production of
enzymes. Company offer these products to its more than 700 global customers
across 50 countries around the world. Content in this paragraph is copied
from chittorgarh.com.

Advanced Enzyme's
R&D team consists of over 55 scientists, microbiologists, engineers, food
technologists and biotechnologists. Company have four R&D facilities, of
which two are located at Thane, and one each at Sinnar and Chino, California.

Undertake turnkey
projects, provide management expertise to their clients for infrastructure
creation and installation for telecom sites which includes Passive
Infrastructure like Towers, Telecom Shelters, Backup Power - DG sets and
Battery Banks, Electrical Infrastructure and Earthing Stations etc. and
active infrastructure like Base Transceiver Station (BTS), microwave, optic
fibre, Base Station Controller (BSC), Mobile Switching Centres (MSC), IN
(Intelligent networks), VAS (Value added services) equipments, transmission
equipment such as STM's and Microwaves to the most advanced World
Interoperability for Microwave Access (WIMAX) equipment and future ready 3G
Nodes. Company also provide technical support services in the High End
Telecom segments such as Radio Frequency and Transmission Planning, Network
Tuning & Optimization and Quality of Service (QoS) to their clients.

September 1, 2013

So the market is so volatile that even seasoned players also are not very sure where it is going. Every day is a new day. So does "Systematic Investment Plan" (SIP) works in this environment. Mostly people have monthly SIP but a month now appears to be a longish period and the advantage of SIPs that you average out and do not try to time the market does not work any more.

So how do we do it. We have done something of modified SIP in our own way. The way we went about it is as follows:

1. Selected following Mutual Funds:

BSL Dividend Yield Plus Direct-G

Franklin India Bluechip Direct-G

HDFC Equity Direct-G

HDFC Prudence Direct-G

ICICI Pru Focused Bluechip Equity Direct –G

IDFC Premier Equity Direct-G

Quantum Long Term Equity-G

UTI Opportunities Direct-G

(Planning to add some debt funds in the same in future)

Why because:

Highly rated as good performance record

From different fund houses thus risk is spread

Covers different categories – Large, Mid etc

2. Now, we decided what is the total amount we want to invest in a month. Let us take around Rs 100000- so if we take around 20 days of market open days, it comes to Rs 5000- per day.

3. Then we started investing Rs 5000- every day in these mutual funds by rotation. This ensures that we are buying market every day whereas at the same time we are rotating investment in these multiple funds.

4. Attached excel sheet helps to track the investments.

5. Created free account on Moneycontrol for the analysis of these investments.

Cons:

Little high maintenance as we have to do investment every day. If by any chance miss a day, next day investment is doubled to cover that.

Since we had higher amount to invest every month, we could select more funds.

Operational tips:

We are doing all these investment online directly on fund house sites so that we are able to invest in Direct plans thus saving on the commission getting paid to broker.

For the above, we have to submit a physical form first time to get folio created

There is some overhead on getting things enabled as in some cases PIN form is to be submitted as well.

We could not use SIP provided by fund houses as there are fix days and we do not like fixing by someone. However if you want to use, we have provided the possible SIP dates in the excel.

August 21, 2013

Yes lot of things were happening. Most of our team members got busy with there life, marriages, career. Nearly all of us moved places and settling at new place, new environment, additional family responsibilities and so on.

In all this our site also moved from one hosting to other...

And then one day which is today, stumble back on it. Pondering on where to start thought of planning again and start afresh. Earlier the focus was on IPO as that was mostly we were investing. IPO dried up and other then SMEs no one is in IPO market.

In fact late last week and this weeks mayhem of stock markets has moved most of the investors away. But as they say when chips are down, it is best time to pick value stocks. If we are too scare to touch stock directly then easy way is to mutual fund way.

With very active SEBI, lot of good things have come in Mutual fund - most of them are online now, Direct plan is best thing to happen to Indian investors > why to pay for commission when there is no service being provided.

Coming back to the point - what are we going to do. We are going to do the same thing as we have started this website for - Sharing our research for your use.

You will see lot of changes in the strategy but that is because we have learned, matured and changed our strategy.

So watch out this space for the same and offcourse if you want to contribute please do let us know...

April 27, 2013

In the FY14 Budget, the Finance Minister has proposed to increase the Dividend Distribution Tax (DDT) on Debt Mutual Funds (other than liquid and money market funds on which the DDT was already 25%) from 12.5% to 25% (plus surcharge and cess) for individuals and HUFs. The hike is proposed to provide uniform taxation for all types of funds other than equity oriented mutual funds in the Mutual Fund Industry.

This amendment will take effect from 1st June, 2013.

Classification of Funds: As far as tax implications on Indian mutual funds are concerned, they are classified as three parts as ‘Equity oriented Funds’, ‘Liquid and money market Funds’ and ‘Debt Funds other than Liquid Funds’. In ‘Equity Oriented Funds’, the categories coming under are Equity Diversified, Equity Sector, Hybrid - Equity Oriented (more than 65% equity) and Arbitrage Funds. Liquid Funds and Liquid ETF are coming under ‘Liquid Funds’ while Ultra Short Term Funds, Floating Rate Funds, Short Term Income, Dynamic Income, Income Funds, Gilt Funds, Fund of Funds, Hybrid - Debt Oriented (less than 65% equity), MIP, FMPs are coming under ‘Debt Funds other than Liquid Funds’.

Tax on distributed income: Given the tax provision on the distributed income, fund houses pay taxes on the dividend distributed to the investors. Fund houses deduct DDT from the Dividend. So the dividends are tax free in the hands of investors.

Existing tax structure on DDT: As per the existing structure, there is no tax levied on the dividend distributed by Equity oriented mutual fund schemes for any investors. But, Liquid and money market Funds are liable to pay the DDT of 25% (plus surcharge and cess) for retail investors while the funds other than Liquid and money market funds are liable to pay DDT of 12.5% (plus surcharge and cess). For institutions and corporates, DDT on Equity funds is nil while 30% (plus surcharge and cess) in case of the dividends from the investments in Liquid Funds and debt funds other than Liquid funds.

Proposed Structure: From June 01, 2013 onwards, retail investors who invest in all debt funds (other than equity funds) are liable to pay DDT of 25% (plus surcharge and cess) on the dividend income. The DDT for corporate investors has been kept unchanged at 30% (plus surcharge and cess).

Increase in Surcharge: Further, the surcharge on Dividend Distribution Tax for all mutual fund schemes has gone up from 5% to 10%. Impact: This move will make dividend options in Debt Mutual Funds unattractive for retail investors. Because the net post tax return in the hands of the investors from dividend plans would be lower as the DDT charged on the debt funds has been increased from 12.5% to 25% (plus surcharge and cess). Meanwhile, the Growth options in the Debt Mutual Funds will become attractive for retail investors who redeem the investments after a year, taking advantage of long term capital gains.

Capital Gain: Since the DDT is applicable for Dividend plans, Capital Gains tax is applicable to Growth plans. The gains from the debt mutual scheme (growth option) are taxed depending on the period the investments in the mutual funds are kept. If the debt mutual fund units are redeemed after a year, then the gains thereon are liable to Long Term Capital Gain tax while the proceeds from the investments which redeemed before one year are taxed as Short Term Capital Gain. For long term capital gains in debt funds, the investor has to pay the tax @ lesser of 10% without indexation or 20% with indexation; (plus education cess). Short Term Capital Gain is taxed as per the normal slab of the investors.

Ultra Short Term Funds,Floating Rate Funds, Short Term Income,Dynamic Income, Income Funds and Gilt Funds.Hybrid - Debt Oriented (less than 65% equity), MIP,FMPs,

32.445% = 30%+ 5% (SurCharges) + 3% (Cess)

33.99% = 30%+ 10% (Sur Charges) +3% (Cess)

Despite the increase in the DDT, Dividend plans in the Debt schemes are still attractive for investors who fall under the higher tax slab of 30%. They still give higher post-tax returns than similar products such as bank fixed deposits. In the Dividend option of debt funds, an investor has to pay the tax of 28.325% (over short term) while in Bank Fixed deposit, he has to pay 30.9%. Growth option in Debt Mutual Funds looks even more attractive if the units are redeemed after a year. Gains thereon are liable to be taxed as Long Term Capital Gains @ lesser of 10% without indexation or 20% with indexation; (plus education cess). Hence, the growth option of Debt funds continues to remain the best bet for anyone who wants to accumulate wealth to meet long-term goals.

Apparently, the categories MIP and Ultra Short Term Funds will be affected much due to the move. Investors who depend on dividend income preferably have invested with MIP categories (in most of the cases). And, the Ultra Short Term category is treated as substitute to liquid funds for their tax efficiencies (hence, both are having similar investment strategy). We arrive at some feasible solutions based on the objectives of the investors who wish to allocate into debt funds.

1. Investors who wish to park their idle money:

Over short term (holding overnight to a year): investors who belong to 30% tax bracket may consider investing in Dividend options of Liquid, Ultra Short term and Short Term Income Funds. They are liable to pay the tax of 28.325% on dividend income. On the other hand, 30.9% of tax has to be paid if Growth option is chosen.

Over Long Term (more than one year): Growth option of Liquid, Ultra Short term and Short Term Income Funds can be the better choice. They are liable to pay Long Term Capital Gains to the lesser of 10.3% without indexation or 20.6% with indexation (plus education cess) while redeeming the units after a year or so.

2. Investors who wish to invest for Short Term:

Dividend options of Ultra Short term and Short Term Income Funds can be the better bets for investors who wish to invest in debt funds over short term. They have to pay DDT of 28.325% on dividend income. On the other hand, they would have pay 30.9% if they chose Growth option.

Effective Post tax yield in Short term investments (for the redemption of within a year):

Particular

Fixed Deposit

Mutual Fund

Growth Option

Dividend Option

Assumed rate of return from the investment (%) p.a

9%

9%

9%

Income tax rate

30.90%

30.90%

NA

Dividend Distribution Tax

NA

NA

28.33%

Effective post tax yields

6.22%

6.22%

6.45%

3. Investors who wish to invest for Long Term:

Growth option of Ultra Short term and Short Term Income Funds can be the better choice for low risk appetite investors. Investors having high risk profile can consider Income and Gilt funds also. If they want marginal equity allocation in their portfolio, then MIP may be the better choice. In all the above cases, investors are liable to pay Long Term Capital Gains to the lesser of 10.3% without indexation or 20.6% with indexation (plus education cess) while redeeming the units after a year or so.

Effective Post tax yield in Long term investments (for the redemption of after a year):

Particular

Fixed Deposit

Mutual Fund

Growth Option

Dividend

Option

Assumed rate of return from the investment (%) p.a

9%

9%

9%

Income tax rate

30.90%

10.3%

NA

Dividend Distribution Tax

NA

NA

28.33%

Effective post tax yields (lumpsum withdrawal after a year)

6.22%

8.07%

6.45%

4. Investors who wish to have regular income:

Investors who need regular income can consider investing in Liquid, Ultra Short Term, Short Term, Income, Gilt and MIPs mutual fund categories by opting Systematic Withdrawal Plan (SWP). This facility allows investors to receive certain amount in regular intervals. In short, SWP is reverse of Systematic Investment Plan (SIP). In SIP you invest a fixed sum every month for a predetermined time period. Under SWP you withdraw a fixed sum for specified time period or till your corpus becomes zero. SWP allows investors to withdraw from the funds after one year from the date of allotment of the units.

Investors looking for income at periodical intervals usually invest in these funds. Often, a systematic withdrawal plan is used to fund expenses during retirement.

Types of SWPs: Under SWP, withdrawals can be fixed or variable amounts at regular intervals. These withdrawals can be made on a monthly, quarterly, semi-annual or annual schedule. The holder of the plan may choose withdrawal intervals based on his or her commitments and needs. SWP is usually available in two options:

Fixed Withdrawal: Under this you specify amount you wish to withdraw from your investment on a monthly/quarterly basis. Appreciation Withdrawal: Under this you can withdraw your appreciated amount on a monthly/quarterly basis.

SWP is tax efficient option in comparison to other options such as Bank and Corporate Fixed Deposits. The tax liability in SWP is lower than that of bank FDs (with the caveat that withdrawals can begin only after a year to avail concessional tax treatment). The applicable tax rate (for the investor who belongs to 30% tax bracket) on the income from SWP is 10.3% which is lower than the applicable tax rate of 30.9% in Bank FDs. A comparative study in the monthly withdrawals from the investments in debt fund (through SWP) and Bank FD for the period of three years clearly shows that SWP is more tax efficient than Bank FDs. The effective post tax yield, an investor gets from SWP option is close to 8.02% while from the Bank FD is around 6.40%. Further, no TDS is applicable in SWP withdrawals but it is applicable in Bank FDs for interest above a certain limit.

Conclusion: Investors can thus take necessary action to control the impact of the above change in tax liability by reviewing their investments in the background of their liquidity, return needs, risk profiles and redeem/switch their investments/plans/options.